Clients in their 50s dealing with a retirement income shortfall are "crying out" for alternative investment solutions to close the gap, according to Axa Life Invest.
Managing director Simon Smallcombe said he believes the market for unit-linked guarantees will grow substantially in the coming years as advisers and their clients look at alternatives to traditional retirement solutions.
He said many people in their 50s are aware they have a pension shortfall but are frightened to invest more aggressively because of market volatility. He added alternatives, such as unit-linked guarantees, provide clients with "participation and protection from an income standpoint" and are becoming more popular with advisers.
Axa Life Invest's unit-linked guarantee range, managed by AllianceBernstein, is targeted specifically at pre-retiree clients and has delivered returns to clients of 5.5% to 10.5% in its first year.
Smallcombe said: "We don't know what that income could look like in seven years' time, the annuity market could change. But what it does do is allow the investor and the adviser to plan today for a worst case scenario for tomorrow.
"Broadly it is about changing habits with advisers. The advisers who were early adopters use them extensively. You then have the sceptics who look and say there is a cost attached to this.
"There is an additional cost, although the Retail Distribution Review (RDR) meant we could reduce the cost of the guarantee because we weren't pricing in any kind of fee structure. Because that made the product clean we reduced our charges post-RDR, so that helped significantly."
Smallcombe said the other barrier to take up was complexity.
"The simplest form we can take on this is that you are buying an insurance for future guaranteed income. People seem to understand insurance. It is combining investing with insurance."
He said the consequences of low interest and annuity rates were pushing people to seek alternatives.
"Money is flowing into this. Given the effect of low interest rates, and the effect on annuity rates people are seeking alternatives to buying an annuity, when you are locked in for life. People are crying out for alternative solutions.
"Over the next three to five years these types of products that offer some protection from any kind of downside in the market will be much more prevalent.
"The one thing that is a mis-conception is talking about the ‘at-retirement' market. The majority of these products are marketed to clients who still have time to do something about it."
The ALI AB Global 40/60 GBP Fund returned 5.5%; the ALI AB Global 50/50 GBP Fund reported an 8.8% return; and the ALI AB Global 60/40 GBP Fund a performance of 10.5%.
Has run Cautious Managed fund since 2011
What’s right – not what sells
Richards fires back at committee report
Available on Investcentre platform
Invested from 2006-2011